[Viewpoint] Time to open our rice marketThe minister for food, agriculture, forestry and fisheries recently mentioned that perhaps it’s time to explore opening up our rice market.
It is a shocking and controversial statement, largely because the ministry has long maintained that we should protect this market at any cost.
Korea, Japan and Taiwan historically did their best to keep their domestic rice markets closed, arguing that self-sufficiency when it relates to such a vital food staple is of the utmost importance. But that is changing. These countries are export-dependent, and to sustain growth they’ve had to open up their rice markets.
After a long tug-of-war, it has been decided that Asian countries that agree to open up their rice markets can impose tariffs.
Countries that postpone opening their markets are required to import a certain amount of rice. The amount of rice that a country must import is called the minimum market access, or MMA. Once the MMA quota increases, a country must keep purchasing the higher quantity even after it opens its domestic market. Therefore, the MMA is a heavy burden - and a disincentive to keeping the market closed.
The rice market is essentially a two-headed beast. One part of the market consists of the long-grain indica rice, while the other part is taken by japonica rice, the type consumed in Korea and Japan, among other countries.
The japonica rice market is relatively small, accounting for only 20 percent of the entire market. For that reason, prices and harvests vary considerably.
When Korea negotiated for the Uruguay Round agreement, it was decided that the country would suspend imposing tariffs by 2004 and import 220,000 tons of rice for the MMA. In 2004, Korea extended the suspension for an additional 10 years.
Korea made the decision amid predictions that the Doha Development Agenda would be over by the end of the year and that tariffs on rice would stay low.
But the DDA negotiations extended into 2008, resulting in a provisional agreement.
It is very likely that tariffs on imported rice will top 50 percent. In addition, climate change and the demand for bioenergy reduce cultivation and the stockpile of rice. Prices for imported cereal grain have doubled, changing the overall situation drastically.
Therefore, the ministry’s argument - that it’s time to open up our rice market - is realistic.
The DDA provisional agreement translates differently according to whether rice is categorized as a sensitive product or a special product.
In either case, there will be no significant difference compared with most tariffs imposed by Japan and Taiwan, which are higher than 560 percent of the original price. If 400 percent to 500 percent tariffs are imposed, imported rice will be more expensive than Korean domestically produced rice. In essence, there will be no reason to import rice.
There is one thing to consider, though.
The timing of tariffs is important, and it will decide the amount of the MMA quota.
For each year of delay, the MMA quota increases by more than 200,000 tons, causing an annual loss of 26 billion won ($18.8 million). That’s why the ministry wants to change the MMA system to a tariff model as soon as possible.
Japan and Taiwan, which have changed their systems to impose tariffs in 1999 and 2003, respectively, do not import rice now other than their MMA quotas.
On the other hand, those who argue that we should wait before we impose tariffs are worried. Negotiations over free trade agreements are still ongoing, and nobody knows for sure when the tariffs will be abolished. Secondly, they maintain that if production in the grain market increases and the foreign exchange rate stabilizes again, the price of imported rice can decrease.
In 2004, the former administration did not display resolve to protect our rice market, even though that meant we would have to sacrifice portions of our other exports. It suspended the decision to impose tariffs only in an attempt to avoid opening our rice market fully, leaving a resolution of the issue to the next administration.
The incumbent administration is tempted by short-term interests and will pass down the burden to the next administration as well, according to some observers.
It’s frustrating to see such a traditional industry fail to prosper, to see its pride trampled.
There is not a single case in which a country suffered ill consequences because it opened a market voluntarily. In our agricultural industry, we still have plenty of diligent and talented people, and we have the largest rice market in the world.
Why do we hesitate when the entire global market waits for us?
We need to have hope and push ahead to start imposing tariffs on imported rice.
*The writer is a professor of rural systems engineering at Seoul National University. Translation by the JoongAng Daily staff.
by Lee Jung-jae